Special Needs Trusts

A Special Needs Trust (SNT), sometimes called a
Supplemental Needs Trust, provides for the needs of a disabled person without
disqualifying him/her from benefits received from government programs like
Social Security and Medicaid. A Special Needs Trust makes it possible to
appoint a trustee to manage assets and qualify or retain for public assistance
benefits.

It is a common belief that a person who is disabled
and receives government benefits can not have a trust. However, this does not
apply to a Special Needs Trust because this trust does not belong to the person
with the disability. The trust is established and administered by someone else.
This administrator is known as the Trustee. Therefore, the person with the
disability does not have the trust but is nominated as a beneficiary of the
trust and is usually the only one who receives the benefits. Furthermore, the
Trustee is given the absolute discretion to determine when and how much money
the disabled person will receive.

The primary purpose of this Special Needs Trust is to
preserve government benefits for disabled beneficiaries. Programs like Social
Security and Medicaid are not based on financial need but are instead based on
the applicant’s age and earnings record. Therefore, those who are beneficiaries
to a Special Needs Trust may still qualify for these programs.

Family-Type Special Needs Trusts

For Family-Type Special Needs Trusts, the parents
provide the money for the trust, often by ill or life insurance that is payable
to the trust. Some parents place their property in a “living” or “inter vivos”
trust and provide in the trust that the disabled child is the beneficiary. With
this type of trust, the trust becomes effective immediately and the disabled
child can start receiving money before the parents are deceased. All family members, like aunts, uncles, and
grandparents, have the ability to leave assets to the trust or write a check to
the trust.

A Family-Type Special Needs Trust cannot be used for
housing, food, and clothing. These things are considered “basic needs” under
the Social Security Income and Medicaid laws. Therefore, if a disabled person
is receiving free housing, food, or clothing, like from a family member or a
trust, then governmental benefits will likely be reduced or eliminated.

Court Ordered Special Needs Trust

A Court-Ordered Trust, also called a Type “A” Special
Needs Trust, is use only for special circumstances, such as where the person
with a disability has inherited money or received a court settlement. Since the
disabled person now actually owns the money the funds cannot be put into a
Special Needs Trust like the parents usually set up.

The
various types of Special Needs Trusts listed above can only be set up by: